What do the new tax tables mean for you, come 1 October?
The Australian Tax Office (ATO) have released new tax tables that will take effect next week – whether you pay wages or receive a regular wage, here are some tips to get you ready for the changes.
It’s been a turbulent few months behind the scenes since the Australian Government’s budget announcements back in May, with many of them finally being introduced to parliament late last month.
The most notable of them is when the 37% marginal tax rate kicks in for individuals, with the tax threshold proposed to increase from $80,000 to $87,000.
This change was to be implemented effective from 1 July 2016, though due to the recent election the necessary legislation was delayed, and the new tax tables released by the ATO will now apply from 1 October 2016.
Visit www.ato.gov.au/Rates/Tax-tables/ to review the new withholding tax tables.
These new tax tables, importantly, don’t take into account any taxes withheld prior to 1 October 2016, which means that individuals affected by the change will be entitled to a bit more of a tax refund than they otherwise would have when coming to complete their 2017 income tax returns, by being credited any extra tax paid between 1 July and 1 October 2016.
That’s the super good news!
What do the new tax tables mean for business owners?
From a practical perspective, that depends on your personal circumstances, and how you pay employee wages. Here are the top 3 scenarios and tips:
1. You use XERO
If you are on Xero, you don’t have to do anything. Xero will take care of all your back end adjustments automatically on 1 October.
2. You use MYOB, Reckon …
If you are using any other accounting software packages, like MYOB or Reckon etc., you will need to contact your software provider to confirm if the update will be automatic or not. If the update is not automatic, you will need to manually download the new tax table and install it yourself prior to processing any employees pays after Sunday, 1 October 2016.
3. You process wages manually
The easiest way to ensure you are not withholding unnecessary tax from your employee is to visit www.ato.gov.au/Rates/Tax-tables/ and use the tax withheld calculator provided in reference to the tax tables applicable to your business and employees.
Although at the date of writing, this legislation has not yet received Royal Assent and may be still be defeated by parliament, it is important to be prepared, and we hope our tips are helpful to you.
If you require any further information relating to these ATO changes, please contact Malcolm Stewart your trusted advisor at MJS Business & Financial Services on 9381 9377.
General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.